Atari 2009 Annual Report Download - page 54

ANNUAL FINANCIAL REPORT – REGISTRATION DOCUMENT
54
FINANCIAL RISKS
Currency risks
The Group has not set up a currency hedging strategy for commercial transactions as there is an overall balance
between revenue and expenses in euros and US dollars, which are the Group‟s main operating currencies.
Exposure to currency risk associated with the financing of subsidiaries is managed by the parent company, which sets up
specific hedges as required depending on the type of financing concerned. At March 31, 2009, the Group had not
hedged its overall exchange-rate exposure on these sums as they represent long-term financing for its US operations.
Nevertheless, as the Group's financial statements are presented in euros, assets, liabilities, revenue and expenses
denominated in other currencies have to be translated into euros at the applicable exchange rate in order to be reported
in the Group's consolidated financial statements. Whenever the value of the euro increases in relation to another
currency, the value in euros of the Group's assets, liabilities, revenue and expenses originally denominated in that other
currency declines. The reverse effect occurs whenever the exchange value of the euro declines. Consequently,
fluctuations in euro exchange rates can have an impact on the value in euros of the Group's assets, liabilities, revenue
and expenses outside the eurozone, even if their value in local currencies remains unchanged. The Group‟s highest
degree of exposure to currency risks relates to revenue and the earnings of subsidiaries operating in US dollars, as well
as to the value of US dollar denominated intangible assets and goodwill.
An unfavorable change in EUR/USD exchange rate would not have a material impact on the Group‟s overall net currency
position. For information purposes, a 1% decline in the value of the US dollar in relation to the euro would have resulted
in a €0.9 million decrease in consolidated revenue in the financial statements for the year ended March 31, 2009 and
would have had respective positive impacts of €0.6 million and €1.9 million on the consolidated loss for the year and
equity.
The table below summarizes the Company's exposure to the US dollar:
(USD millions)
March 31, 2009
Total assets 138,7
Total liabilities 74,6
Net 64,1
Off-balance sheet position 43,9
Net position after hedging 64,1
Interest rate risks
The Group does not use a dynamic interest rate risk management program. As of March 31, 2009, it had a borrowing
position at variable interest rates of €50 million.
In the event of a 100 basis point increase in interest rates, the resulting additional interest expense for the year ended
March 31, 2009 would have been approximately €0.4 million or 5.2% of the cost of consolidated debt as of that date.
In view of the afore-described risk sensitivity analysis, the Group considers that a change in interest rates would not have
a material impact on its financial position.
Credit risks
As a result of the sale of the retail distribution business in Europe and Asia, the Group‟s customer base is now
concentrated in the United States. The main customers of the American subsidiary Atari Inc. (whose business is the retail
distribution of games) are general retailers and retailers specialized in video games such as Gamestop, Wall-Mart, Best-
Buy, Toys‟R‟Us, etc. The risk of insolvency on the part of such retailers is considered low. As Atari Inc.‟s customer base
is concentrated on a limited number of low-risk customers, the company has not taken out insurance to insure itself
against the risk of bad debt.
Exposure to industrial and environmental risks
The Group's business consists of developing, publishing and distributing entertainment software. It has no significant
direct environmental impact. In general, the Group subcontracts all of the manufacturing of the digital media (CDs,
cartridges, etc.) to third parties.
OTHER RISKS
To the best of the Company's knowledge, no specific factors other than those referred to above are likely to have a
material impact on its business.
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MEASURES TAKEN TO PROTECT THE BUSINESS
This information is provided in the "General Information" section of the Registration Document.